Scottish businesses raise costs and hire fewer staff due to National Insurance rise, research finds

The rise in National Insurance contributions is pushing up prices and reducing job creation in Scotland, according to new research.

An increase in employers' National Insurance contributions (NICs) was announced by the UK Government in order to raise money for health services.

Labour ministers estimate the move, which takes effect this month, will bring in £20bn but charities, colleges and unions have urged the Chancellor to take action over the costs to organisations on the frontline of public services.

Now work by economic research institute Fraser of Allander shows the impact on Scottish companies.

Its latest Scottish Business Monitor found firms are increasing charges and bringing in fewer staff in response to the financial pressure generated by the NICs change.

Almost nine in 10 companies surveyed in March said they anticipate higher costs for the next six months and 80 per cent expect "very weak to weak" economic growth.

Some said they were also cutting employee benefits to adjust to higher costs.

Almost half of businesses said they have passed those costs on to customers through increased prices, and around the same level have reduced hiring plans.

Economists have flagged the possibility that the hike to employer NICs will trigger higher-than-target inflation.

Fraser of Allander says the policy is expected to "heavily impact business planning this year".

Questions around tariffs are said to have added to uncertainty for firms.

Sanjam Suri, of the Fraser of Allander Institute, said the results "bear out what we expected", adding: "Increases in employer NICs – both through the higher rate and the reduced threshold – have already been affecting businesses as they prepared for the implementation of the changes in April 2025.

"With four out of five businesses facing higher payroll costs and almost half cutting back on hiring and increasing prices, the effects of higher costs have been making their way through companies' plans for the coming year. Add in the uncertainty around trade, and it makes for a difficult in-tray to manage.

"Economic policy and political uncertainty are uppermost in the minds of Scottish businesses, even more so than borrowing costs or staff availability."